On average this will mean an extra £51 a year for families to pay on their household bills.

Hannah Maundrell, Editor in Chief of Money.co.uk said: “Yet another hike in Insurance Premium Tax seems crazy as it’ll add £51 to the average household’s insurance bill. The cost of insurance is expected to rise anyway – this will make it so much worse.

“The prospect of paying this much more for insurance simply has to be a wake up call for people who stick with the same insurer year after year.

He said the rate will rise from 10 per cent to 12 per cent from June next year

“Who has that kind of cash to spare? Worse still, if you pay monthly for your insurance, the horrendous rate of interest you’re likely to pay will make this hike even more of a blow.”

The move represents a doubling in the tax rate on home and motor insurance premiums within the past two years.

Insurers usually pass tax increases onto policyholders – rather than cop the cost of the rise themselves, with the Government set to net £4billion using the tax hike between June 1 next year when it is introduced through to 2022.

Nonetheless the Treasury insists the IPT is a tax on insurers, and that drivers will be £40 a year better off due to their clampdown on dodgy whiplash claims and because of the freeze on fuel duty for a seventh year running.

IPT is only charged on general, and not long term insurance, and so 80% of premiums are exempt from IPT. The UK IPT rates are lower than many other European countries.

Mr Hammond set out a range of tax hikes, including a crackdown on “unfair” salary sacrifice schemes which are used to reduce levies on employee benefits.

From April 2017 Mr Hammond said he would align the employee and employer National Insurance thresholds at £157 per week, costing firms up to £7.18 a year for each worker.

Announcing a squeeze on salary sacrifice schemes, Mr Hammond said: “The Government will take action now to reduce the difference between the treatment of cash earnings and benefits.

“The majority of employees pay tax on a cash salary. But some are able to sacrifice salary and pay much lower tax on benefits in kind.

“This is unfair, and so from April 2017 employers and employees who use these schemes will pay the same taxes as everyone else.”

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Mr Hammond also announced a further crackdown on tax dodges as part of a crackdown aimed at raising around £2 billion over the Autumn Statement forecast period.

Confirming that Whitehall spending squeezes will continue, Mr Hammond said plans set out in 2015 would remain in place.

The £3.5 billion of efficiency savings announced at the Budget are to be delivered in full, but departments which meet their targets would be able to reinvest £1 billion of efficiency savings in priority areas in 2019/20.

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Following the Autumn Statement, Tim Ryan, Executive Chairman at UNA; the organisation owned by 13 of the UK's largest regional insurance brokers, said another increase to insurance premium tax will significantly hit the pockets of families throughout the country and risks consumers forgoing buying insurance at all.

Mr Ryan said: "In the space of a year insurance premium tax (IPT) has now risen from six per cent to 10 per cent and now to 12 per cent.

“This is a significant blow. As a result this will significantly hit the pockets of families throughout the country with significant figures being added to the average buildings and contents policies.

“When IPT was initially raised to 9.5 per cent, which was bad enough, our own survey of 1000 consumers found that a quarter were forgoing buying insurance as a result.

“This is a huge concern as it increases their personal risks, and in the case of motor insurance could mean a rise in illegal drivers.

“Now, from June, this risk is heightened even further. The case of reducing fraudulent claims is a huge and well documented battle facing the insurance industry and the introduction of a rule change on whiplash compensation is some relief.

“We need to continue tackling this issue head-on to ensure the honest consumers can benefit from the most competitive insurance deals but I fear another rise in IPT is going to seriously hamper this. It is crucial that the industry finds the right balance between preserving access to justice for innocent victims whilst ensuring that exaggerated and fraudulent claims can be challenged."

Critics claim the increase will hit the pocket of hard-up families the most

Steve Treloar, LV General Insurance Managing Director, said: “Government has incorrectly stated that IPT is a tax on insurers – it’s not, it’s a tax that consumers have to pay when they purchase insurance.

"This is now the third IPT increase in a row, so it’s extremely disappointing that the Treasury appears to be setting a precedent of placing an ever-increasing burden on hardworking consumers.

"We understood that the previous 0.5 per cent IPT increase in the last Budget was specifically for raising an additional £700m funding for flood defence management – yet we are still no closer to understanding how this will be distributed.

"Unfortunately the Government has also been slow to implement its reforms around unnecessary and exorbitant motor claims, so this latest increase is yet another blow for consumers, hitting their pockets hard with, as yet, nothing to show for it.”

Kevin Pratt, consumer affairs expert at MoneySuperMarket, said: “As far as drivers are concerned, the Chancellor seems to be giving with one hand and taking away with the other. If whiplash reforms can deliver £40 per policy savings and if insurers can be trusted to pass on those savings in full, that’s great news.

"But the 20 per cent increase in insurance premium tax (IPT) is grim news for Britain’s households, affecting car, home and pet insurance, among others. It’s a crude and punitive tax at a time when we’re seeing double-digit inflation in car insurance premiums.

What is Insurance Premium Tax?

First introduced in 1994, Insurance Premium Tax (IPT) is a tax on general insurance premiums, including home insurance, car insurance and travel insurance.
There are two rate bands, the standard rate of 9.5 per cent and a higher rate of 20 per cent which applies to travel insurance, appliance insurance and some car insurance.
The tax does not apply to long term insurance, reinsurance and some commercial forms of insurance.
As the tax is added as a percentage on top of the premium itself, there is somewhat of a postcode lottery effect, as those living in areas where insurance costs more pay more in tax.
The move was expected to generate billions annually for the Treasury but was highly controversial, being labelled a “stealth tax” by some.
Insurance premium costs had been on the way down, but new research by Consumer Intelligence earlier this year revealed that car insurance premiums have increased 13 per cent over the past year.

“The Chancellor is clearly milking insurance customers for all they’re worth – how else do we explain this tax rising by an inflation-busting fifth, from 10 per cent to 12 per cent of premiums? More importantly, IPT is now double what it was this time last year - prudent consumers will be outraged and quite rightly so. Let’s not forget car insurance is a legal obligation - Mr Hammond knows drivers have nowhere to hide. This is even more reason for motorists to shop around to ensure they’re getting the best deal at renewal."